On November 7, 2023, the City Council of Chicago approved a referendum that will put Chicago’s ‘mansion tax’ on the 2024 primary ballot on March 19, 2024. If passed, the measure would change the amount of real estate transfer taxes the City of Chicago imposes on commercial and residential properties.
What You Need to Know:
- Chicago’s City Council approved a referendum that will appear on the voting ballot in March 2024, which, if passed by Chicago voters, will modify the amount of real estate transfer taxes buyers and sellers will pay for Chicago properties – both residential and commercial.
- The proposed system introduces a tiered taxing approach. Instead of a flat rate of $3.75 for every $500 of purchase price, the City’s transfer tax would be:
- $3.00 for every $500 up to $1,000,000;
- $10.00 for every $500 between $1,000,000 and $1,500,000; and,
- $15.00 for every $500 that exceeds $1,500,000.
- This tax will be in addition to those imposed by the Chicago Transit Authority, the State of Illinois and Cook County.
- If voters approve the graduated tax approach in March 2024, it would likely go into effect in 2025.
The City has assessed a tax rate of $3.75 per $500 on the purchase price of all real estate that is not subject to certain exemptions. The tax revenue is used for general corporate purposes.
This new measure would introduce a tiered system:
- $3.00 for every $500 of a purchase price up to $1,000,000;
- $10.00 for every $500 of a purchase price between $1,000,000 and $1,500,000; and,
- $15.00 for every $500 of a purchase price that exceeds $1,500,000.
Buyers would pay this transfer tax, but if buyers are exempt from transfer taxes, this burden shifts to sellers.
The additional revenue generated by this tiered system over the current real estate transfer tax would create dedicated sources of funds to address homelessness in Chicago.
This tax is in addition to the real estate transfer taxes imposed by the Chicago Transit Authority (the "CTA"), the State of Illinois and Cook County.
By way of example, below are tables showing the current real estate transfer tax impositions versus those that would be imposed under the proposed plan.
| Taxes Imposed Under Current System | | | | | |
| Purchase Price | City Tax | CTA Tax | State Tax | County Tax | Total Taxes |
| $1,000,000 | $7,500 | $3,000 | $1,000 | $500 | $12,000 |
| $1,500,000 | $11,250 | $4,500 | $1,500 | $750 | $18,000 |
| $5,000,000 | $37,500 | $15,000 | $5,000 | $2,500 | $60,000 |
| $10,000,000 | $75,000 | $30,000 | $10,000 | $5,000 | $120,000 |
| Taxes Imposed Under Proposed System | | | | | |
| Purchase Price | City Tax | CTA Tax | State Tax | County Tax | Total Taxes |
| $1,000,000 | $6,000 | $3,000 | $1,000 | $500 | $10,500 |
| $1,500,000 | $16,000 | $4,500 | $1,500 | $750 | $22,750 |
| $5,000,000 | $121,000 | $15,000 | $5,000 | $2,500 | $143,500 |
| $10,000,000 | $271,000 | $30,000 | $10,000 | $5,000 | $316,000 |
The measure requires a majority of voters to approve, and if passed, this tiered system would likely go into effect in 2025.
It is unclear whether commercial and industrial properties located in Enterprise Zones would still be exempt from Chicago's real estate transfer taxes under the new system.
Tom Goodwyn and Jack Brinker are associates in the firm's real estate practice where they each practice general transactional commercial real estate law. Tom and Jack's practices include advising clients in the eligibility for real estate transfer tax exemptions. They can be reached at thomas.goodwyn@saul.com and jack.brinker@saul.com.
